12/24/2009 @ 9:00AM

How ObamaCare Will Affect Your Insurance

The Senate’s historic 60 to 39 party-line Christmas Eve vote to pass ObamaCare still has to be reconciled with the House’s version. But put one detail–abortion funding–aside, and the Senate’s bill is likely the best rendering of what the final legislation will look like.

In short, the 2,000-page, $871 billion bill will cover an additional 30 million or so Americans by expanding Medicaid, setting up subsidized exchanges for individuals to buy insurance plans and by forcing people to buy coverage or pay a penalty. The bill will be funded by cuts to the Medicare program, a tax on “Cadillac” insurance plans, as well as new fines on health care companies and a bump up in the Medicare tax for higher-income Americans.

Only time will tell how the legislation will change the ways we receive and pay for care, but here are our best predictions of how your health coverage might change under ObamaCare.

Right now I have no insurance. How does this help?

If the bill is going improve anyone’s lot, it will be those who are currently uninsured. If you make more than four times the federal poverty level ($88,000 for a family of four) you will now have to buy coverage and pay the whole premium. If your income is lower, the good news is that Medicaid, the government plan for the poor, will expand to cover you plus 14 million other people, but only those making less than 133% of the federal poverty level will be completely covered. If you’re somewhere in between, you will also have to buy a plan, but you can do it on a newly created exchange. Your contribution will be capped at 9% of your household income and generous subsidies are available. It may sound complicated, but the message is simple: You will have health insurance coverage.

What if I have Medicare?

The Senate bill, like the House one, makes deep cuts to this federal health care program for the elderly, about $40 billion a year, which is about 10% of the program’s annual budget. About one-fourth of those cuts come out of private Medicare HMO plans. That could be bad news for the one in four Medicare beneficiaries who’ve signed up with
Humana
, the AARP plan run by
UnitedHealth Group
, or another carrier, in order to avoid paying the $96 a month for Medicare’s Part B program or to avoid the $1,100 hospitalization deductible. Private Medicare HMO members might have to find a new plan because the features will change. If you use traditional Medicare, coverage should not change dramatically. However, know that providers will get paid less, with hospitals, drug companies and doctors all taking pay cuts of $10 billion to $20 billion a year to fund the bill. Will that result in worse service? “People with Medicare are right be concerned,” says Joe Baker, president of the Medicare Rights Center. But he’s hoping that everyone learns to be more efficient and that there will be no drop-off in quality.

Like 170 million others, I get insurance through work. Will that change?

It could. Even though the president has said that the bill will not force anyone to change coverage they like, he can’t control how the bill’s policies will be carried out by individual companies. First the good: if you currently get a plan that’s second-rate, the bill will nudge your employer to offer better coverage. The bad: because of the way the private exchanges are structured–even though they are designed for individuals and very small employers–it might make sense for large companies to reclassify full-time workers as independent contractors so they can buy their own subsidized insurance on the new, highly regulated markets for individuals. Urban Institute scholar Gene Steuerle speculates that many lower-wage employers will shift more work to contractors to avoid compliance problems with the bill. The employees in turn will use the exchange, potentially making the government subsidies more expensive than projected–and forcing workers to change plans.

Assuming I keep coverage at work, will it at least get cheaper?

That is doubtful. The northward march of health spending–7% to 9% a year–will not abate because of this bill, and employer plans typically force employees to pick up about one-fourth of the cost. Three factors are at work that will push up costs. First, HMOs as an industry will have to pay a huge fee each year–$2 billion to start and eventually $10 billion. Those costs will be passed on to companies and their employees and could total $300 a year per family with private insurance. Second, the bill calls for all at-work plans to be generous to a certain point. That means that employers offering cheaper coverage, such as a high-deductible plan–will have to change and pass on those costs as well. Finally, those employees who have so-called Cadillac coverage but are not exempted from the bill’s rules because of membership in a union or residence in a high-cost state will have their benefits taxed. At first this will be a small group, and even the 40% tax charged to HMOs (and likely passed on to customers in the form of higher premiums) on benefits worth more than $23,000 will not raise that much revenue. But after a decade of inflation, this excise tax could affect more employers, who would have to cut compensation, benefits or pass on the costs to the workers.

What about the insurance I buy myself?

The market for individual and small business insurance plans is where health care is the most dysfunctional and the root of the swelling ranks of uninsured. There’s a lot of good news here. If you suffer from a pre-existing condition that prevented you from getting an affordable policy in the past, those days are over. Also, individuals and families buying coverage through the state-run exchanges in the Senate bill may be eligible for large subsidies if they make less than four times the federal poverty level. Otherwise, buying insurance for one’s self will likely be similar, though perhaps cheaper because the private exchanges will cut out expensive middleman brokers. Also, the Senate bill allows for a new federal health plan using private HMO networks that could end up being a good bargain. If you choose not to buy coverage, get ready to pay a fine. It will start at $95 in 2014 and then rise to $750 in 2016.

What if I own a business?

If you own a business and already offer generous benefits, little will change, though companies with fewer than 25 employees may be eligible for certain subsidies and companies with fewer than 50 or 100 workers, depending on the state, could shop for coverage on one of the new exchanges. If your business doesn’t offer benefits, it should be prepared to start, or pay $750 per worker who buys subsidized coverage via the exchange.

How will the bill affect my doctor?

The biggest priority for physicians used to be shielding themselves from medical malpractice lawsuits, which they say caused them to order unnecessary tests for fear of being sued. The bill is light on malpractice reforms, and only funds a few pilot projects. So doctors will still be in a state of litigation-induced paranoia. The bill also funds projects aimed at getting doctors to work together to provide continuity of care, as well as new ways of paying for care, alternatives to the fee-for-service system that many blame for the cost-quality problems in medicine. These projects may or may not bear fruit, but there’s little in the bill that will immediately affect how doctors practice. It’s still going to be hard to find a doctor in many places–though the bill provides some funding for medical education, it will take years for those docs to get licensed.